Take-Two to Acquire Zynga for $12.7 Billion

Take-Two Interactive to Acquire Zynga in Major Gaming Consolidation

A significant consolidation is occurring within the gaming industry. Take-Two Interactive has announced its intention to acquire Zynga, a leading mobile game developer, in a transaction valued at $9.86 per share – comprising $3.50 in cash and $6.36 in Take-Two common stock.

Combining Gaming Powerhouses

This acquisition unites two prominent forces in the gaming world. Take-Two is renowned for its console and PC titles, including the highly successful Grand Theft Auto series. Zynga, conversely, is a major player in the mobile gaming space, responsible for popular games like FarmVille, Empires & Puzzles, and Words with Friends.

Take-Two projects that the combined entity will generate $6.1 billion in net bookings over a 12-month period (as of September 30, 2021). This positions the new company as one of the largest in the gaming sector, irrespective of platform.

Transaction Timeline and Leadership

The completion of this transaction is anticipated in the first quarter of fiscal year 2023, contingent upon both shareholder and regulatory approvals.

Strauss Zelnick, Chairman and CEO of Take-Two, expressed enthusiasm regarding the deal. He stated that it substantially diversifies the company’s business and solidifies its leadership in the rapidly expanding mobile gaming market.

Synergies and Growth Opportunities

Zelnick further highlighted the strategic benefits of combining their console and PC franchises with Zynga’s mobile publishing platform. He anticipates annual cost savings of $100 million within two years post-closing, alongside potential Net Bookings opportunities exceeding $500 million over time.

Frank Gibeau, CEO of Zynga, echoed this sentiment, emphasizing the synergy between Zynga’s mobile expertise and Take-Two’s established capabilities and intellectual property.

Organizational Structure

Following the acquisition, Strauss Zelnick will continue to lead the combined company. Frank Gibeau and Bernard Kim, Zynga’s President of Publishing, will oversee the expanded mobile business, integrating Zynga’s operations with Take-Two’s existing mobile ventures.

Strategic Rationale and Cost Savings

Like many industry consolidations, this deal is driven by the pursuit of cost efficiencies through synergies. Take-Two expects to realize approximately $100 million in annual savings after the initial integration phases.

The acquisition significantly expands Take-Two’s presence in the mobile gaming market, complementing its existing mobile titles and franchise extensions.

Zynga’s Trajectory and Acquisition Context

Zynga’s share price has experienced volatility since its initial public offering, with a recent decline making it an attractive acquisition target. The company has navigated a dynamic mobile gaming landscape, adapting to evolving consumer preferences.

A Legacy of Mobile Innovation

Zynga emerged as a pioneering force in mobile gaming, initially capitalizing on the social graph of Facebook. However, changes to Facebook’s platform impacted Zynga’s audience reach, necessitating a focus on acquiring and developing new, popular titles, such as Peak Games (acquired in 2020 for $1.8 billion).

Expanding Content and IP

The combination with Take-Two, publisher of franchises like Red Dead Redemption, NBA 2K, and BioShock, will provide a vast library of intellectual property for creating new mobile gaming experiences. Conversely, Zynga’s IP may find new audiences across different platforms.

Engaging with the Gaming Community

A key consideration will be how the combined company leverages its expanded content to engage with the broader gaming community, particularly on platforms like Twitch and Discord.

Growth in the Gaming Market

The gaming market has experienced substantial growth, particularly during the COVID-19 pandemic. Take-Two reported that the mobile gaming industry generated $136 billion in gross bookings in 2021, with a current growth rate of 8%. Mobile gaming is now projected to account for half of Take-Two’s total bookings.

Further updates will be provided as the acquisition progresses.